The Subprime Loan Machine: Turns out this looming crisis in the subprime mortgage market is all our fault.
The rise and fall of the subprime market has been told as a story of a flood of Wall Street money and the desire of Americans desperate to be part of a housing boom. But it was the little-noticed tool of automated underwriting software that made that boom possible.
Automated underwriting software spawned an array of subprime mortgages, like those that required no down payment or interest-only payments. The software effectively helped move what was a niche product only a decade ago into the mainstream.
[…] critics say the push for speed influenced some lenders to take shortcuts, ignore warning signs or focus entirely on credit scores.
[…] automated underwriting reduced the average cost to lenders of closing a loan by $916. The software quickly weeds out the very riskiest of applicants and automatically approves the rest.